Step 1:ReadUberPricing Strategies and Marketing Communications

Step 2:Answer the following questions in a discussion

1. How did Uber achieve its present position? (e.g., How are users recruited? What is the value that Uber offers? Why was Uber successful?)
2. Where are the positive feedback loops? Is Uber losing momentum?
3. Should Uber continue or pivot?
4. Was surge pricing a distraction or a core part of the business model?
5. How does Lyft influence pricing for Uber?
6. Is Uber'scompetition with Lyft a good or a bad thing? For the company? For consumers?Explain.
7. Why did the use of social media fail Uber in Seattle?

(THE CASE STUDY IS BELOW)

Uber Pricing Strategies and Marketing Communications By late March 2016, Uber Technologies, Inc., an e-hail ride-sharing company, was on a roll, rapidly expanding service to untapped markets worldwide and gaining new, enthusiastic customers, as well as a few vocal and visible detractors. Some of its critics were focused on Uber's practice of "surge pricing," a tactic that increased rates sharply in times of higher demand for car service. Other groups that disliked the company included competing taxi and limo services, which argued that inadequate driver screening and training endangered consumers and made for unfair competition in the highly regulated industry. In addition, some city governments enacted regulations to limit the number of cars on the road that ride-sharing companies could offer, and others completely banned the service. Aside from monetizing private cars into ride-sharing services offered around the globe, Uber slowly added a delivery service (UberRUSH) and eventually created an application program interface (API) enabling an Uber button to be added to other organizations' apps (e.g., Facebook, retailers, florists) for delivery options through UberRUSH and UberEATS for food products. While Uber explored growth in new markets, competitors in its core space were working hard to take market share. Lyft, Uber's major U.S. ride-share rival, had raised $1 billion in capital and was investing some of it toward discounts and increased marketing efforts while expanding in major cities across the country. As Uber's dominance grew, would striking a balance between becoming ever more present internationally, positioning itself in new service markets, and turning a profit in its home market and competency be the firm's next major business challenge? Taxi and Limousine Industry In 2014, the American taxicab and limousine market was enormous, employing close to 233,700 drivers nationally who earned an average annual salary of $23,210.1 The Bureau of Labor Statistics estimated that there would be a 13% increase in the number of drivers between 2014 and 2024 (more than twice the average total of all occupations). Major cities such as Chicago, Illinois, and New York City, New York, controlled the industry through the use of medallions. New York City alone had 13,437 yellow cabs licensed through the medallion system, as well as 32,000 limousine and livery (call-ahead) vehicles. The number of taxi medallions was fixed, and those sold on the open market could fetch more than $1 million. The New York City Taxi & Limousine 1 United States Department of Labor, Bureau of Labor Statistics, 'Taxi Drivers and Chauffeurs," http://www.bls.gov/ooh/transportation-andmaterial-moving/taxi-drivers-and-chauffeurs.htm (accessed Mar. 31, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 2 UV6878 Commission calculated a medallion's annual return on investment as close to 20%. Many cities used the medallion system as a way to ensure income for the medallion owner.2 Taxis were either hailed on the street or sent out after a passenger called a central dispatcher. Livery car service was prearranged; the cars generally could not be hailed on the street, protecting taxis from competition. There was usually a waiting period between the call for a car and passenger pickup, in some cases up to an hour.3 By and large, taxis were regulated at the municipal level and livery services were regulated by state agencies. One method employed by regulatory agencies to ensure that vehicles hailed on the street were licensed was to standardize their appearance. Taxis had a distinctive look (e.g., mustard yellow in New York City) and were required to indicate clearly whether or not they were in service. Other taxi and livery regulations included a set number of vehicle inspections per year, requirements for the location of a taxi service's dispatch station/business operations, and whether or not customers could be solicited and cars assigned to customers for pickup.4 Taxicabs charged passengers based on time and distance, which were calculated by a taximeter prominently displayed inside the vehicle. Taximeters calculated fares based on a highly regulated and standardized fare schedule (e.g., $3.50 per mile for the first five miles and $5.00 per mile thereafter). Livery vehicles had no taximeters, and fares were usually based on time, or rough distance with a predetermined minimum price that was agreed on in advance. In general, livery vehicles were not allowed to charge based on time plus distance. When an alternative ride-share option started to develop in the mid-2000s, the International Association of Transportation Regulators, a trade group representing taxicab and livery drivers, took notice. In July 2013, they called for the prohibition of what it called "bogus" and "rogue" ride-sharing services in the name of public safety. In a press release, the association claimed it was protecting the public from unlicensed drivers who could be drug users or criminals. In effect, the trade group called for a ban on mobile applications (apps) that would allow people to make ride arrangements via smartphone. Taxi and rental-car usage started to dipbut it was unclear whether ride sharing was responsible (see Exhibit 1 for business traveler data). And unrestricted New York City taxi medallions dropped in price from $1 million in 2014 to as low as $400,000 in 20165 only 19 independent unrestricted medallions had been sold in New York City during 2015.6 Yet it seemed that when regulatory agencies failed to protect the industry in New York City, the response was "if you can't beat 'em...join 'em." In the fall of 2015, the New York City Taxi and Limousine Commission (TLC) launched a pilot called Alternative Technology, which was a partnership between the organization and tech companies to test products in New York City cabs. One system was GPS-based taximeters and the other an alternative technology system (ATS) that provided driver payments through credit-, debit-, and prepaid-card payment systems (through an e-hail app); driver authentication and text messaging; trip data collection; passenger notifications that included visual accessibility features; automatic vehicle location systems; and driver, medallion owner, and agent reporting.7 2 Steve Chapman, "Ride-Sharing vs. the Taxi Industry," Chicago Tribune, February 20, 2014. 3 David Hoyt and Steven Callander, "Uber: 21st Century Technology Confronts 20th Century Regulation," Stanford Graduate School of Business case study no. P81 (Stanford, CA: Stanford Graduate School of Business, 2012): 2. 4 Hoyt and Callander, 2-3, 5. 5 NYCITYCAB.com, http://nycitycab.com/business/taximedallionlist.aspx (accessed Apr. 27, 2016). 6 Author calculations based on data from the New York City Taxi & Limousine Commission, http://www.nyc.gov/html/tlc/html/archive/archive_med_transfer_2015.shtml (accessed Apr. 27, 2016). 7 New York City Taxi and Limousine Commission, "Memorandum of Understanding: Terms and Conditions for Taxi and Limousine Commission Authorization," http://www.nyc.gov/html/tlc/downloads/pdf/mou_tech_project.pdf (accessed Mar. 22, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 3 UV6878 Uber Background Uber Technologies, Inc., originally called UberCabs, was founded in 2009 by tech start-up veterans Garrett Camp and Travis Kalanick and headquartered in San Francisco. Uber began as a private luxury car service catering to Silicon Valley's top executives. In those days, someone in need of a ride had to e-mail Kalanick for a code that would give them access to the app. Kalanick had recognized the potential profit in empty limousine seats and idling taxis. In 2010, watching cars traverse San Francisco, Kalanick was convinced that the concept of technology bringing drivers and passengers together efficiently could scale globally. By 2010, Kalanick had executed an aggressive growth strategy. Uber's cofounders had very different roles within the company. Camp, a serial entrepreneur who cofounded StumbleUpon in 2002, acted mostly as a silent partner. From Uber, he went on to another start-up, Expa, which developed new consumer products, systems, and services. The public face and voice of Uber clearly belonged to its other cofounder. Kalanick grew up in Northridge, California. He attended UCLA, but dropped out to develop his first start-up, Scour, a file-sharing program. In 2000, Scour was sued for a quarter of a trillion dollars by the Motion Picture Association of America, for copyright infringement.8 Subsequently, Scour filed for Chapter 11 bankruptcy protection. Kalanick's next venture, Red Swoosh, a peer-to-peer networking site, was bought by Akamai Technologies in 2007 for $15 million.9 Kalanick was personally involved in efforts to overcome regulatory agencies' resistance to Uber's expansion in a number of cities. Indeed, he was described as a "brawler" who relished a good fight, whether it be on Twitter with a competitor's CEO or with the entrenched taxi and limousine governmental bodies he viewed as a threat to Uber's growth.10 Uber had encountered significant political headwinds in a number of markets; fierce resistance came from Portland, Oregon; Paris, France; Miami, Florida; Denver, Colorado; and Washington, DC. Some states such as California fined the company for regulatory violations. Uber has had legal clashes in Germany (where it was banned), and in Spain, Colombia, France, Australia, Italy, Denmark, China, and England.11 The company expanded rapidly, and by March 2016, it was operating in 400 cities12 in 65 countries, with more than 162,000 active driver partners.13 Examples of cities served were Abu Dhabi, the United Arab Emirates; Amsterdam, the Netherlands; Bangalore, India; Bogot, Columbia; Doha, Qatar; London, England; Moscow, Russia; New York City; Rome, Italy; Shanghai, China; Tokyo, Japan; and Zrich, Switzerland (see Exhibit 2 for locations). Kalanick was able to attract influential and high-profile investors whose funding helped fuel Uber's rapid expansion. Among those financiers were Ashton Kutcher, Jeff Bezos, and Google's investment division, which in August 2013 gave Uber $258 million in capital.14 The company was valued at $62.5 billion just shy of three years later.15 8 John Borland, "Movie Studios Target Scour with Copyright Lawsuit," CNET, July 20, 2000, http://news.cnet.com/2100-1023-243432.html (accessed Apr. 1, 2016). 9 "Akamai Acquires Red Swoosh," Akamai Technologies, Inc., press release, April 12, 2007, https://www.akamai.com/us/en/about/news/press/2007-press/akamai-acquires-red-swoosh.jsp (accessed Apr. 1, 2016). 10 Marcus Wohlsen, "What Uber Will Do with All That Money from Google," Wired, January 3, 2014. 11 B. R., "Taxi Services: Unsafe in The Knowledge," Economist, July 16, 2015, http://www.economist.com/blogs/gulliver/2015/07/taxi-services (accessed Apr. 1, 2016). 12 "Uber Now Available in Abuja, Nigeria," Premium Herald, March 24, 2016, (accessed Mar. 31, 2016). 13 Emily Badger, "Now We Know How Many Drivers Uber Hasand Have a Better Idea of What They Are Making," Washington Post, January 22, 2015. 14 Wohlsen. 15 Matt Levine, "Uber is Raising More Money from Rich People," BloombergView, January 15, 2016, http://www.bloombergview.com/articles/2016- 01-15/uber-is-raising-more-money-from-rich-people (accessed Mar. 31, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 4 UV6878 The Uber Product Uber's product was a smartphone app that allowed urban dwellers to hail vehicles virtually (see Figure 1). Fares fluctuated, and the company employed no drivers itself. Instead, Uber served as an electronic dispatcher as passengers and drivers connected digitally through its proprietary software. The app matched "willing" drivers and "needy" consumers thusly: a potential passenger, who had downloaded the Uber app onto his or her smartphone, put in a request for a car to take him or her to a specified location. When the passenger requested a ride, he or she got access to a driver's name, car model, and rating. Based on that information, the passenger could accept or decline the ride. If accepted, the driver usually arrived within a few minutes. Uber's short wait times, facilitated by proprietary algorithms that directed drivers to locations where customers were most likely to call, were seen as one of its significant operational advantages. As one customer stated, "I found Uber remarkably convenient, considering chasing down a cab on a New York City weekend evening can be quite the task."16 Uber's fares were calculated according to its algorithmsdeveloped by a data-science team of nuclear physics, computational biology, and astrophysics PhDswhich helped match supply with demand. The price for a ride was higher during times of peak usage. Some customers were critical of Uber's policy of dramatically increasing fares during periods of peak demand (e.g., rush hour, New Year's Eve, Halloween, and inclement weather), a practice Uber referred to as surge pricing (see Figure 2). Fares were continually adjusted according to a mathematical formula and could be as much as 16 Author interview with Uber user A, January 12, 2014. Figure 1. Uber app showing Black Car option and UberX option. Source: Author screenshot from Uber mobile app. Figure 2. Uber surge pricing notice. Source: Author screenshot from Uber mobile app. For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 5 UV6878 seven or eight times the normal Uber rate.17 Kalanick defended the surge pricing policy as one that benefited passengers, since it incentivized drivers to make more pickups. Indeed, scholars had looked at cab driver behavior and found that many (particularly new drivers) did not finish their entire 12-hour shift if they had hit their target income before the shift ended.18 One group of passengers, however, launched a class-action lawsuit against Kalanick and was successful in being granted standing in April 2016. A federal judge agreed with the plaintiffs that Kalanick may have violated antitrust laws against price fixing by organizing "independent contract" drivers to charge higher prices through surgesa claim Kalanick said was "unwarranted" and against which he planned to defend himself and win. Despite Kalanick's aggressive defense of surge pricing, Uber lowered some of its rates in January 2014, although no plans were made to eliminate surge pricing. While dynamic pricing had been around for some time in other industries, by 2016, even the storied, serviceoriented Disney Company announced that it would implement demand pricing during peak hours at its theme parks.19 Uber charged the customer's credit card (which was kept in his or her Uber profile) after a trip was completed and e-mailed a receipt to the passenger (see Figure 3). Uber kept 20% of the fare and paid the driver the remaining 80% via direct deposit; the passenger and driver never exchanged money directly. In the first half of 2015, Uber's gross revenue was estimated to be $3.63 billion ($2.93 billion the previous year).20 Uber's share of that revenue would be approximately $726 million annually. In a single month during March 2016, Uber made 169 million trips worldwide and 50 million trips in the United States, earning on average $0.19 per ride.21 Uber Business Model The ride-sharing platform Uber established meant keeping consumers and drivers connected and satisfied. In an article on the costs and benefits of the sharing economy, one author said that the sharing economy "matches people who want to share assets online," and that "such efficiency gains may come at cost for 17 David Goldstein, "Uber 'Surge Pricing' Controversy Is a Cautionary Tale Against Taxi Deregulation," Stranger, December 20, 2013, http://slog.thestranger.com/slog/archives/2013/12/20/uber-surge-pricing-controversy-is-a-cautionary-tale-against-taxideregulation?oid=18528505&show=comments&sort=desc&display= (accessed Mar. 18, 2014). 18 Colin F. Camerer, "Taxi Drivers and Beauty Contests," Engineering and Science no. 1 (1997): 11. 19 S. K., "Disney Discovers Peak Pricing," Economist, February 29, 2016, http://www.economist.com/blogs/freeexchange/2016/02/pricediscrimination-land (accessed Apr. 1, 2016). 20 Amir Efrati, "Uber's Losses Grow, But So Do Its Profit Projections," The Information, January 11, 2016, https://www.theinformation.com/uberslosses-grow-but-so-do-its-profit-projections?unlock=aabcb5&token=4c278112edde93bcecd8d27043114b45bb862981 (accessed April 1, 2016). 21 Eric Newcomer, "Lyft is Gaining on Uber as It Spends Big for Growth," Bloomberg Technology, April 14, 2016, http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth?cmpid= BBD041416_BIZ&utm_medium=email&utm_source=newsletter&utm_campaign (accessed Apr. 1, 2016). Figure 3. Uber receipt. Source: Author screenshot from Uber mobile app. For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 6 UV6878 traditional economy."22 Uber did not directly employ drivers; rather, it claimed that it simply facilitated the connection between passengers and drivers, similar to how a website such as Expedia connected passengers and airlines. Uber did not own a fleet of vehicles, although it had guidelines as to what vehicle types its drivers could use for each service. For example, UberX vehicles had to be 2000 models or newer (and 2005 models or newer in some cities), have four doors, seat four passengers with seat belts, and have no cosmetic damage. Services Uber offered varied worldwide. In most of the markets Uber served, customers could select from one of five services: UberX, UberXL, UberBlack, UberSUV, and UberTaxi. UberX was the least expensive option and dispatched drivers in smaller vehicles than those used for the other services. On its website, Uber claimed that its UberX service (which seated four) was "18% lower than taxi prices."23 UberXL, the larger cousin to UberX, was for bigger groups: the vehicles seated six passengers and could be a van. And unlike the other services, UberX and UberXL utilized both professional and nonprofessional drivers. UberBlack, the original Uber service, used black town cars; fares for these vehicles were roughly 35% more than for UberX. Still, it was described as the "poor man's town car"it targeted those customers who could not afford a fulltime driver but who wanted more luxurious transportation than a yellow cab or public transit. UberSUV worked well for large parties and was priced higher than the UberBlack service (see Table 1). UberTaxi allowed passengers to use the Uber app to hail a regular taxi. Unlike users of the other Uber services, customers using UberTaxi paid standard taxi rates, plus a booking fee of a dollar or two, and a 29% tip in some cities.24 (See Exhibit 3 for more Uber services offered in certain geographic areas.) Table 1. Sample Uber rates in Denver, Colorado, April 2016. UberX UberXL UberSUV UberBlack Base fare (start with this fare) $0.75 $3.00 $14.00 $ 7.00 Per mile (under 11 miles) $1.00 $1.85 $ 3.75 $ 3.00 Per minutes (under 11 miles) $0.13 $0.00 $ 0.00 $ 0.35 Minimum fare $4.95 $7.95 $25.00 $15.00 Cancelation fee $5.00 $5.00 $10.00 $10.00 Service fee $1.95 $1.95 $ 0.00 $ 0.00 Data source: "Denver Uber Prices," Uberestimate.com, http://uberestimate.com/prices/Denver/ (accessed Apr. 25, 2016). After a ride was completed, the passenger and driver could rate each other on a scale of one to five stars. Uber drivers had the right to refuse to pick up a passenger whose rating was three stars or lower. One Uber driver defended this practice by stating that low-rated passengers were "not worth the headache and hassel [sic]."25 In some cases, passengers whose drivers reported them as particularly poorly behaved had their accounts suspended. There were other advantages for Uber driversfor example, they did not have to provide kickbacks to human dispatchers to increase the likelihood that the dispatcher would steer fares their way. Drivers were guaranteed to be paid, because Uber had passengers' credit card information on file. One Uber driver in San Francisco noted that when he drove a taxi, he would make about $300 for a 10-hour shift, whereas with Uber, on a good day, he could make $700. "I hope the new idea will work," Mohamed Mandour said. "Because then we will be taking over the whole Bay Area."26 (See Table 2 for wage comparison.) 22 Georgious Petropoulos, "Uber and the Economic Impact of the Sharing Economy Platform," Bruegel, February 22, 2016. 23 "Getting More for Less on UberX: UberXBetter, Faster, and Cheaper than a Taxi," Uber Newsroom, November 20, 2013, https://newsroom.uber.com/us-dc/getting-more-for-less-on-uberx/ (accessed Apr. 1, 2016). 24 "UberX vs. UberSelect vs. UberTaxi vs. UberBlack," Techboomers, https://techboomers.com/t/uberx-uberselect-ubertaxi-uberblack (accessed Apr. 1, 2016). 25 "While You're Rating Uber, Uber Is Rating You (and It Could Cost You a Ride)," June 10, 2013, http://sarahsfav.es/2013/06/10/while-yourerating-uber-uber-is-rating-you-and-it-could-cost-you-a-ride (accessed Mar. 18, 2014). 26 Brian X. Chen, "Uber, an App That Summons a Car, Plans a Cheaper Service Using Hybrids," New York Times, July 1, 2012. For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 7 UV6878 Table 2. Earnings per hour, Uber and taxi/limo drivers, 2014. Cities Uber Taxi/Limo Boston $20.29 $12.92 Chicago $16.20 $11.87 Washington $17.79 $13.10 Los Angeles $17.11 $13.12 New York City $30.35 $15.17 San Francisco $25.77 $13.72 Average for all Uber markets $19.19 $12.90 Data source: Jonathan Hall and Alan Krueger, "An Analysis of the Labor Market for Uber's DriverPartners in the United States," Princeton University working paper, January 22, 2015, https://timedotcom.files.wordpress.com/2015/01/uber_driver-partners_hall_kreuger_2015.pdf (accessed Apr. 25, 2016). Uber had market-specific criteria for its drivers. On its website, an individual interested in driving for Uber would select the appropriate city, and the requirements for drivers in that market would appear. For example, in March 2014, if someone interested in driving for Uber in New York City went to the company's website, he or she would be presented with two sets of criteria: one for UberBlack (town car) and one for UberTaxi (yellow cab).27 For UberBlack, the prospective driver had to have "commercial car insurance, a [Transportation Charter Permit], and an airport permit." His or her vehicle had to be a black "sedan, crossover SUV, or full-size SUV" that "comfortably seats 4+ passengers."28 If an individual was interested in becoming an UberX driver, he or she had to be "21 years of age or older," with "an in-state Drivers License (depending on your state)," and "instate car insurance" who drove a four-door sedan.29 By the end of 2015, Uber had 162,037 driver partners who had made more than three passenger trips.30 Conflict and Regulators Generally, Uber conflicts centered on the municipal taxi and/or state limousine regulatory agency insisting that Uber was subject to agency authority since Uber was, in effect, operating as a transportation service. These agencies had strict guidelines about how passengers should contact the service provider, the fare structure, and the labeling and appearance of vehicles.31 The use of nonlicensed drivers and contentions that Uber's fare platform was a high-tech metered service were the basis of many challenges. Uber countered these regulatory efforts, insisting that it was merely a service that connected drivers and passengers and was not operating as a transportation company. Therefore, it should not be subject to the rules and regulations governing taxis and livery cars. Uber's entry into the San Francisco market represented one of its earliest victories against regulatory agencies.32 Meanwhile, it was well known that taxi service in Washington, DC, was replete with problems, including not enough cabs in circulation, unreliable call-ahead service, and a reputation for taking advantage of passengers unfamiliar with the city.33 Passengers also complained that taxis would refuse to take them to certain parts of 27 For updated requirements, check Uber's New York City website at http://driveubernyc.com/tlc/ (accessed Apr. 29, 2016). 28 "Uber Car Requirements," I Drive With Uber (blog), http://www.idrivewithuber.com/uber-car-requirements/ (accessed Apr. 28, 2016). 29 http://www.idrivewithuber.com/uber-car-requirements/ (accessed Apr. 28, 2016). 30 Badger. 31 Hoyt and Callander, 2. 32 Hoyt and Callander, 5. 33 Author interview with Uber user B, February 3, 2014. For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 8 UV6878 the city.34 DC taxicabs, unlike those in New York City, did not accept credit cards. "This is my biggest qualm with them," one passenger said. "It is 2014. I do not have cash."35 Another practice passengers disliked was when dispatchers managing the taxi line at major destinations (e.g., Union Station) forced them to share cabs with other passengers they did not know. In this instance, both riders paid the full fare, despite the forced sharing arrangement.36 As one disgruntled passenger said, "In New York City, you would never be forced to share a cab but still pay the full fare."37 These shortcomings made Washington, DC, an attractive location to Uber, and it attempted to enter the market during the summer of 2012. Uber's relationship with DC regulators was immediately contentious and resulted in Uber drivers being targeted in stings by city officials and having their cars impounded.38 Uber reached out to its users on Twitter, Facebook, YouTube, and its website and asked for support. The result was 50,000 personal e-mails and 37,000 tweets with the hashtag #UberDCLove being sent to City Council member Mary Cheh, who had initially opposed Uber's entry into the DC market.39 Cheh subsequently dropped her opposition. Miami proved to be another market where Uber encountered strong political headwinds. In mid-2013, Uber ran afoul of Miami-Dade County commissioners, who refused to approve legislation that would allow Uber to operate in their jurisdiction. Uber continued to operate without adhering to warnings and was then faced with legislation in some areas that required fingerprinting driver-partners. By 2016, Uber had won its battle over fingerprinting in several jurisdictionsespecially in those markets where Uber threatened to pull out and citizen backlash was intense.40 The U.S. market wasn't the only place Uber ran afoul of regulators and legislators. Uber's unlicensed drivers in Amsterdam resulted in Dutch court battles, and in 2015, the company decided to pull its service called UberPOP (similar to UberX in the United States), but continued to offer its licensed-driver services such as UberBlack and UberLUX in that country.41 In France and Spain, cabbies strongly resisted Uber's efforts, staging demonstrations and street closures regularly. Taxi driver trade and union groups successfully stopped Uber's unlicensed-driver services from operating in Germany with a court decision. Only UberTaxi and licensed services continued in certain areas of that county in 2016. In addition to court battles and political wrangling, Uber was scrutinized on safety issuesoften quite publically. Most of the problems involved drivers arrested for assaults (physical and sexual), drivers making lewd or racial comments, drunk drivers, or customer complaints about drivers taking longer routesalthough Uber would quickly refund passengers who reported inefficient routes. There were also high-profile news stories about passengers attacking or harassing Uber drivers. While it was difficult to monitor and compare the troubles between Uber and regular taxi rides, the United States Taxicab, Limousine & Paratransit Association started a campaign to track and make public ride-sharing risks and incidents.42 34 Jackie Bensen, "DC Taxicab Passenger Complaints," August 28, 2013, http://www.nbcwashington.com/news/local/DC-Taxicab-PassengerComplaints_Washington-DC-221583171.html (accessed Mar. 18, 2014). 35 Author interview with Uber user C, February 4, 2014. 36 Uber user C. 37 Uber user B. 38 Hoyt and Callander, 7. 39 Christine Lagorio-Chafkin, "Resistance Is Futile," Inc., July/August 2013. 40 Douglas Hanks, "Uber Faces Fingerprinting Fight in Miami-Dade," Miami Herald, February 25, 2016, http://www.miamiherald.com/news/local/community/miami-dade/article62532202.html (accessed Apr. 1, 2016). 41 "UberPOP Stopt in Nederland," Uber Newsroom, November 18, 2015, https://newsroom.uber.com/netherlands/uberpop-stopt-in-nederland/ (accessed Apr. 1, 2016). 42 "Who's Driving You?" http://www.whosdrivingyou.org/rideshare-incidents (accessed Apr. 12, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 9 UV6878 Uber had claimed that safety was "built into" all things Uber (i.e., driver background checks, extensive driver screening, and commercial $1 million insurance policies). In April 2016, Uber settled a California lawsuit around misrepresentation of its driver background checks, agreeing to pay $10 million and cease using the terms "safest ride on the road" or "the gold standard" in its marketing.43 Uber also had to refund passengers the $1 "safe ride fee" it had been charging.44 Market Entry/Employee Recruitment When it was time to launch service in a new city, Uber executed a consistent strategy.45 Approximately six weeks before its targeted start date, Uber would send an advance team to the location to recruit already-licensed drivers. Another team was tasked with community management, which included creating a local social media groundswell about Uber's impending entrance into the market and hosting private parties for local influencers to help create buzz. Local managers oversaw, in effect, two very different businessesdrivers/logistics and social media/public relationsand Kalanick hired people who could successfully handle both.46 In cities where it was well established, Uber would attempt to hire drivers away from competitors to further increase its share of the market. In some instances, these recruitment efforts were quite direct. A San Francisco Lyft driver recounted how, in November 2013, he picked up two attractive women. Something about them struck him as odd; they were evasive about where they were headed. In short order, they dropped their ruse and tried to recruit him to drive for UberX. They offered him a $50 gas card for checking out Uber's headquarters, a free lunch, and a $500 bonus for picking up 20 passengers and promised that, if he accepted, Uber would waive its commission for the remainder of the year. As the driver saw it, "How smart is that recruiting drivers in their very own car?"47 Another driver-recruitment tool Uber utilized in San Francisco in 2013 was a mobile billboard featuring a pink mustache (Lyft cars' branding feature) and a razor, urging Lyft drivers to "Shave the stache."48 Ride-Sharing Competition In addition to traditional competitors, another set of Uber challengers was entering the rapidly developing technology-based personal urban transportation arena. This groupwhich included the companies Lyft, Hailo, and Sidecar in the United Statesemployed a business model that closely resembled Uber's, with passengers and drivers connecting via technology rather than a human dispatcher (see Figure 4). 43 "Settlement with District Attorneys of San Francisco and Los Angeles," Uber Newsroom, April 7, 2016, https://newsroom.uber.com/dasettlement/ (accessed Apr. 12, 2016). 44 Caitlin McGarry, "Uber Has to Refund Those So-Called Safe Ride Fees," Macworld, February 12, 2016, http://www.macworld.com/article/3033033/software/uber-has-to-refund-those-so-called-safe-ride-fees.html (accessed Apr. 15, 2016). 45 Lagorio-Chafkin. 46 Hoyt and Callander, 2. 47 Ellen Huet, "Uber, Lyft, Sidecar Put Driver Recruiting in High Gear," SFGate, January 31, 2014, http://www.sfgate.com/bayarea/article/UberLyft-Sidecar-put-driver-recruiting-in-high-5190676.php (accessed Mar. 17, 2014). 48 Henry Grabar, "Taxi Battle of the Day: Uber vs. Lyft," Atlantic Cities, May 7, 2013, http://www.theatlanticcities.com/jobs-andeconomy/2013/05/taxi-ad-battle-day-uber-vs-lyft/5519 (accessed Mar. 17, 2014). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 10 UV6878 Lyft represented the largest of these competitors. It pursued a differential positioning strategy as the "anti-Uber"49 and offered a peer-to-peer ride-share service. Lyft did not provide a black-car service, and as of December 2013, it was estimated to be doing onethird of Uber's weekly ride load, although Lyft's growth rate was more than double Uber's at that same time. Estimated net revenues in 2014 reached $130 million, and by 2015, reached $1 billion in gross annual revenue.50 Lyft offered a low-tier shared-ride options called Lyft Line and Plain Lyft, similar to UberX, which seated four, and Lyft Plus for larger groups that included SUVs. Lyft's passengers and its 315,000 drivers connected through a smartphone app. Passengers were allowed to ride in the front seat of private vehicles when there were too many passengers for the backseat, and drivers (who did not hold livery or taxi licenses) greeted passengers with a fist bump. A distinctive mustache on the front of a vehicle identified it as part of the Lyft fleet (see Figure 5). In some markets, Lyft published a structured fare schedule. In others, it asked passengers to give drivers a donation. And passengers could tip drivers. Unlike Uber, the company did not practice surge pricing in the beginning, but eventually added "prime time" charges that the company said occurred when demand for drivers exceeded the number of drivers available. One former Washington, DC, Lyft driver, James Montana, described his experience:51 49 Carmel Deamicis, "Lyft Introduces Uber-Style Surge Pricing, Urges Us Not to Call It That," PandoDaily, November 22, 2013, http://pando.com/2013/11/22/lyft-introduces-uber-style-surge-pricing-urges-us-not-to-call-it-that (accessed Mar. 18, 2014). 50 Heather Somerville, "Lyft Executive Says on Track to Hit $1 Billion in Gross Revenue," Reuters, November 17, 2015, http://www.reuters.com/article/us-lyft-runrate-exclusive-idUSKCN0T621K20151117#7j71Oao6sDUYoY7r.99; and Tracey Lien, "Lyft Defies Predictions by Continuing to Grow as a Rival to Uber," Los Angeles Times, January 5, 2016, http://www.latimes.com/business/technology/la-fi-0105- lyft-growth-20160105-story.html (accessed Apr.15, 2016). 51 Author e-mail correspondence with James Montana, April 9, 2014. Figure 4. Lyft app. Source: "Lyft screenshot," posted to public domain under Creative Commons (CC BY-SA 4.0) by "Cstockwe," November 1, 2014, https://commons.wikimedia.org/wiki/Catego ry:Lyft#/media/File:Lyft_screenshot.PNG (accessed Apr. 25, 2016). Figure 5. Lyft vehicle. Source: "A Lyft vehicle in Santa Monica, CA," posted to public domain under Creative Commons (CC BY-SA 4.0) by "Praiselightmedia," May 13, 2014, https://commons.wikimedia.org/w/index.php?curid=38084668 (accessed Apr. 26, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 11 UV6878 From my point of view, here's how it went. A Lyft startup team parachuted into DC with orders to get Lyft up and running in the city, and build market share as quickly as possible. To accomplish that, the startup team (1) hired lots of drivers, like me, (2) paid an hourly floor to drivers, either at $15 per hour or $25 per hour depending on day and time, and (3) kept the price of fares very low. This price and wage regime lasted for about six months. It was clear even to the most distant and careless observer (e.g., me) that this regime was a major money loser for Lyft. Lyft sent me weekly pay statements which listed the amount of money that Lyft took in fees from passengers, and the amount of money that Lyft was paying me in hourly. Lyft never made money on me, because [it] always paid out more in hourly than it earned in rider fees. I drove until midnight on New Year's Eve, and Lyft lost money on me on that night, too. From that, I inferred that Lyft was burning lots of venture capital in order to get established in DC. It couldn't go on forever, though, so, after six months, Lyft eliminated both elements of the old regime: Lyft dropped the hourly pay for drivers and, a few months later, Lyft raised prices for riders. By that time, I had become a Lyft "mentor," which is Lyft's way of outsourcing hiring to its own drivers. I noticed that Lyft was hiring lots of new drivers, presumably to replace those who had dropped out due to decreases in pay. I don't know how this has changed the experience for riders. Anecdotally, I think there are fewer drivers out there because the passengers report longer wait times. I drive rarely now, because the leisure is worth more to me than the money. In January 2014, Uber responded to its Lyft competition by placing social media advertisements depicting a man and a woman fist-bumping with the headline "Don't Pay a Premium to Fist Bump." The caption read, "Uber costs less than Lyft, guaranteed."52 Within a year, Lyft had seemingly responded through a brand redesign, shedding the moustache and replacing it with a Lyft window sticker, redesigning the app, and investing heavily in marketing throughout major U.S. cities. There were Lyft ads on billboards, at bus stops, and salespeople handing out $50 coupons in major cities. Lyft was offering new customers discounts of up to half off during the week across the country. During the month of March 2016, Lyft claimed it made 11 million trips.53 (See Table 3.) By 2016, Lyft had raised $1 billion in private equity, including $500 million from General Motors. The firm was valued at $5.5 billion and operated in 190 cities across the United States.54 Table 3. Market share numbers from Lyft and Uber. Lyft Uber Austin 45% 55% Los Angeles 45% 75% San Francisco 43% 66% Data source: http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth. 52 Cotton Delo, "In Quest for Ride-Sharing Supremacy, Uber Takes on Lyft with Facebook Ads," January 17, 2014, http://adage.com/article/digital/uber-takes-lyft-facebook-attack-ads/291158 (accessed Mar. 18, 2014). 53 http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth?cmpid=BBD041416_BIZ& utm_medium=email&utm_source=newsletter&utm_campaign. 54 Eric Newcomer, "GM Invests $500 Million in Lyft," Bloomberg, January 4, 2016, http://www.bloomberg.com/news/articles/2016-01-04/gminvests-500-million-in-lyft-to-bolster-alliance-against-uber?cmpid=BBD041416 (accessed Apr. 15, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 12 UV6878 Internationally, Uber's largest competitor was Didi Kuaidi, a ride-sharing company in China. With more than 1.4 billion rides provided annually and a partnership with Lyft, Didi Kuaidi offered serious competition.55 Throughout Southeast Asia, Grab offered a twist to the usual ride-sharing appsits technology connected dispatch companies to passengers. It too had a strategic partnership with Lyft by 2016. Promotion and Branding Uber relied on social media for much of its promotional activity. Platforms included Twitter, Facebook, YouTube, and its own website. The company used campaigns to connect with customers and promote its brand. Uber's motto, "Everyone's Private Driver," was displayed prominently on its Facebook page and incorporated into its YouTube promotional videos in the early years.56 The logo was a black "U" that reflected the motto, according to the company.57 By 2016, Uber had adopted a new motto, "Evolving the Way the World Moves," and it changed its logo to a teal-colored square with a circle the middle of the bit-like shape for riders and a hexagon in the middle for drivers. The colored square on the outside, meant to symbolize a bit (think bits and atoms), changed to red in China, green in Ireland, and turquoise in India.58 Instead of hiring an agency to redesign the logo, Kalanick worked on it himself with a team of 12. "I didn't know any of this stuff," he said. "I just knew it was important, and so I wanted it to be good."59 In addition, Uber utilized creative one-day promotional events. On Valentine's Day 2013, Uber launched its "Romance on Demand" service, whereby a customer could order flowers through the Uber app. Uber also held a one-day ice-cream delivery promotion in cities, including Boston, New York, and Munich,60 and a oneday Christmas-tree delivery service in December 2014.61 Uber's promotional activities were not exclusively social-media based; it also used more established methods to grow its business. For example, new customers could receive a certain dollar amount off their first Uber ride. Kalanick used his personal Facebook and Twitter accounts, which had more than 63,000 and 115,000 followers, respectively, as of March 2016, to promote Uber. On Facebook, he had posted about Uber's launches in the new countries, as well as delivery services such as puppies on demand (UberPUPPIES). He used Twitter to publicize Uber's regulatory difficulties in various markets and an account of his stint as an UberX driver. Uber also used TV and radio spots in select cities across the United States to recruit drivers and defend its business model and practices. During one campaign in 2015, Uber ran ads on "three radio stations, five broadcast, and 17 cable systems."62 55 http://www.zacks.com/stock/news/207881/who-are-ubers-biggest-competitors (accessed Apr. 1, 2016). 56 "Uber: Everyone's Private Driver," YouTube video, posted by "Uber," February 5, 2013, http://www.youtube.com/watch?v=P2M0RD7bhYY (accessed Mar. 18, 2014). 57 Kia Kolkalitcheva, "Uber Explains Its Bizarre New Logo," Fortune, February 2, 2016, http://fortune.com/2016/02/02/new-uber-logo/ (accessed Apr. 29, 2016). 58 For more information, see Uber, "The Idea at the Core of Who We Are," February 2, 2016, https://brand.uber.com/#bits-atoms; and Uber, "A Local Feel for a Global Brand," February 2, 2016, https://brand.uber.com/#our-new-look (both accessed Apr. 29, 2016). 59 Jessi Hempel, "The Inside Story of Uber's Radical Rebranding," Wired, February 2, 2016, http://www.wired.com/2016/02/the-inside-story-behindubers-colorful-redesign/ (accessed Apr. 1, 2016). 60 Alex Baldinger, "Uber Promises Ice Cream Delivery on Friday, but Will Cones Runneth Empty?" Washington Post, July 18, 2013. 61 "O #Ubertree, O #Ubertree," Uber Newsroom, December 4, 2013, http://blog.uber.com/UberTREE (accessed Mar. 1, 2014). 62 Ken Kurson, "Revealed: Uber's TV Buy Is Gigantic," Observer News & Politics, July 22, 2015, http://observer.com/2015/07/revealed-ubers-tvbuy-is-gigantic/ (accessed April 19, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 13 UV6878 The Last Mile: UberEATS and UberRUSH Although Uber had been running promotional delivery partnershipsfrom delivering ice cream, Christmas trees, and puppies to cuddlesince its early days, there seemed to be a shift from marketing to a new market entry. It started out as a small concept in two single-city markets in Los Angeles, California, and another one in Barcelona, Spain, wherein Uber facilitated foodies with on-demand food deliveries from their favorite restaurants. At first, customers would use their Uber ride-sharing app to make arrangements, but a standalone app, UberEATS, was not far behind. The restaurant delivery quickly expanded to Chicago; New York City; Houston, Texas; Los Angeles; San Francisco; and Toronto, Canada, by March 2016. "UberEATS is like a gamechanger for us," one restaurateur wrote. "People can get our food within ten minutes."63 Whether prompted by its success moving items in the food-service industry or not, in 2015, UberRUSH was launched in New Jersey, and allowed business owners to deliver items to customers, associates, or friends. UberRUSH started with a $2.25 base fare, plus $1.65 per mile, and had a $5 minimum.64 UberRUSH expanded to include New York City, Chicago, and San Francisco. That service also started with a tab choice on the Uber ride-share app and then partnered with Shopify, Delivery.com, Nordstrom, and several other businesses by adding an UberRUSH API to their websites and apps. For example, a United Airlines passenger could check in for a flight on the United app and then find the closest Uber driver for his or her ride to the airport. Or he or she could set up a dinner reservation on the OpenTable app and summon Uber without having to leave the OpenTable app. As Uber continued its growth with new product offerings in the delivery space, another tech company, Amazon, would have it on the radar. With its Prime membership offering free two-day delivery service and its Prime Now Flex app on-demand delivery option, Amazon seemed to have a network similar to Uber's new offering. Flex was created in 2015 and offered one-hour delivery within certain geographic areas (14 U.S. cities). The company had explored the use of drones and even buying its own fleet of jets to get items to customers faster. The Flex app worked the same way as UberRUSHdrivers picked up parcels at Amazon warehouses closest to them. Driver requirements included only the use of a midsize or larger sedan. Hourly rates ran between $18 and $25 dollars and drivers paid for their own gas and insurance. With both data-driven tech companies moving into the last mile delivery space, had Uber positioned itself to compete with the likes of Amazon in what was a noncore market for both of them? And what effect, if any, would sending customers outside of Uber through its integrated apps have on Uber's core business? In addition, would Uber's platform continue to enable it to scale? 63 "UberEATS Now Serving Chicago, NYC," Uber Newsroom, April 28, 2015, https://newsroom.uber.com/ubereats-now-serving-chicago-nyc/ (accessed Apr. 25, 2016). 64 "Introducing UberRUSH," Uber Newsroom, February 2, 2015, https://newsroom.uber.com/us-new-jersey/introducing-uberrusha-reliable-ridefor-your-deliveries/ (accessed Apr. 25, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 14 UV6878 Exhibit 1 Uber Pricing Strategies and Marketing Communications Business Travelers and Percentage of Uber, Taxis, and Rental Cars as Overall Ground Transportation Q1 2014 Q2 2015 Uber 9% 29% Taxis 52% 35% Rental Cars 39% 36% Data source: "Infographic: Sharing the Road," Certify, 2015, https://www.certify.com/infograph-sharing-the-road.aspx (accessed Apr. 25, 2016). Exhibit 2 Uber Pricing Strategies and Marketing Communications Uber Geographic Markets North America 195 Central and South America 27 Europe 71 Middle East 11 Africa 11 East Asia 30 South Asia 29 Southeast Asia 14 Australia and New Zealand 13 Data source: "Uber Cities Across the Globe," Uber website, https://www.uber.com/cities/ (accessed Mar. 31, 2016). For the exclusive use of J. Wang, 2020. This document is authorized for use only by Jianghong Wang in MKTG 303 - Case Studies taught by Sharaya Jones, George Mason University from Aug 2020 to Feb 2021. Page 15 UV6878 Exhibit 3 Uber Pricing Strategies and Marketing Communications Description of Uber Offerings and Promotions as of April 2016 UBER OFFERINGS* UBER (NOT OFFERED IN ALL LOCATIONS) DESCRIPTION UberTaxi Hail a taxi using Uber app for $2 fee/must pay driver directly UberPOOL Join other riders to share UberPEDAL On-demand bike rack option for cyclists in a jam or that last mile UberMOTO Ride share motorcycles UberMILITARY Drivers are military servicemembers, servicemember spouses, or veterans UberFAMILY Vehicles have car seats UberRUSH On-demand delivery network UberEATS Have meals or snacks from local restaurants delivered UberSELECT Drivers pick up riders in BMW 3-Series, Audi A4, or Mercedes UberDLUX Drivers pick up riders in Rolls-Royce, Bentley, or Maserati UberCHOPPER Drivers provide rides in helicopters UBER PROMOTIONS UberPUPPIES During select times and in select cities, riders can request and have 15 minutes with puppies brought to their location (most puppies were up for adoption) UberKITTENS Shelter kittens brought to rider's location (most kittens were up for adoption) Zuber Partnership with Disney to turn Uber app into Zootopia Business Profiles Riders have the option to label a ride a business trip, use a business credit card, add an expense memo or code, receive a work receipt sent to a work email address, and get a weekly or monthly travel report UberICECREAM Drivers deliver ice cream on demand on select days UberTREE Riders use app to have Christmas tree delivered UberSANTA Drivers deliver a goodie bag from select caf/bakery partners UberHEALTH Drivers deliver wellness packets** for $10 and administer a free flu shot UberGIVING Riders can be a secret Santa and pay for gifts delivered to underprivileged children UberMAYO Drivers deliver Mariachi bands, margarita mix, and piatas UberCADE Riders can order a black town car with three Uber Secret Service agents and two Suburbans that flank the town car on President's Day UberHELMET Riders can use app to order a bike helmet for a $10 donation to charity UberRECYCLE Riders can use app to recycle waste on demand via Uber for free UberCYCLE Riders can request a 20-minute bike ride with pro cyclists UberASSIST Drivers are trained to help disabled or elderly passengers and load wheelchairs *Excludes car services, such as UberX, mentioned previously in this case. **Included in packets: water bottle, tissue, hand sanitizer, lollipop, and recyclable tote bag.